Stoxx Europe 600 posts worst monthly loss since June

LONDON (MarketWatch) — European stock markets ended January with their worst monthly loss since June on Friday, after an unexpected drop in euro-zone inflation added to fears of deflation in the region.

The Stoxx Europe 600 index
SXXP, +0.03%
dropped 0.3% to end at 322.52, closing 0.7% lower on the week and losing 1.8% on the month.

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Investors also reacted to company earnings, both in Europe and the U.S. Shares of Electrolux AB
ELUXB, -0.04%
slid 8.8% in Stockholm after the domestic-appliances firm reported a wider-than-expected loss in the fourth-quarter.

“With little left in the [European Central Bank’s] tool kit, a cut in the refinance rate looks a likely response,” said Gautam Batra, managing director and investment strategist at Signia Wealth, in emailed comments. The ECB next meets to discuss interest rates on Thursday.

ECB Executive Board member Benoît Coeuré also addressed the issue of low inflation, saying in the prereleased text to be delivered in Slovenia on Friday that the central bank has more tools it can employ to fight a bleak inflation outlook.

“There are monetary policy instruments that could be used in the event of downward risks to medium-term price stability, even if the nominal interest rate is constrained by the zero lower bound,” he said.

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